Nest has cut its planned charge on contributions from 2 per cent to 1.8 per cent.
The annual management charge will remain at 0.3 per cent, as previously announced by the Government.
Under the structure contributions will be charged on the way in, but not on the way out. If a saver makes a total contribution of £100, £98.20 will be invested. The 0.3 per cent AMC will be levied annually on the value of individual’s pension pots. All of Nest’s costs will be met by its membership.
Nest managing director of scheme development Helen Dean says: “This is great news. Members of Nest will have a scheme with a charge level approaching the best in the market.”
Nest points to the charges which currently apply to the stakeholder cap. It says a typical 36 year old scheme member would experience a 5.8 per cent reduction in the value of their pot in Nest as a result of charges, compared to 13 per cent in a stakeholder cap. The analysis assumes pension providers a stakeholder cap charge of no more than 1.5 per cent of a member’s funds under management for the first 10 years, falling to 1 per cent thereafter.
Nest chief executive Tim Jones says: “Today’s announcement underpins our low charge offer – we have a charge level which approaches levels only found in the best of today’s pension schemes. This is a level that our target market would be unlikely to access without Nest in the market.”